Startups Find Shortcuts to Payments on Social Media

Social media sites, including Twitter and Facebook, have been enticing but sometimes hostile environments for payments innovation. Some startups are pushing past the platform providers to appeal directly to their users.

ChangeCoin, a Bitcoin-based micropayments platform, supports payments on Twitter, YouTube, Google+, Reddit, Github and Tumblr through its ChangeTip platform. Other companies, such as Patreon, also prefer to work directly with the sites' users rather than try to integrate with each platform.

"We're not the first people to build or talk about micropayments online…but Bitcoin actually unlocks [micropayments online] because it has very low transaction fees, can allow people to send very low values…and is a currency neutralizer, meaning you don't have to know whether the person on the other end uses pesos or rupees or other Fiat," said Nick Sullivan, founder and CEO of ChangeCoin.

Sending funds is as frictionless as leaving a comment. For example, on Twitter, a user sends Bitcoin by tweeting the Twitter handle of the person they want to send money to, an amount and adding @changetip.

Companies such as American Express, Amazon.com, Chirpify and Dwolla have used a similar model to support payments via social media. This approach, which requires some degree of setup off Twitter's site, may be designed to work around Twitter's restrictions for handling payments on its platform. Twitter has shut down some efforts to enable payments on its platform, typically for running afoul of its advertising policies that prohibit companies from prompting replies, retweets and other actions.

Twitter is also reportedly developing its own "buy now" button, and it bought CardSpring, a payments infrastructure company, in July.

Even the companies that Twitter permits have in some ways changed or restrained their efforts. After launching as a consumer-focused service on Twitter, Chirpify transformed into an advertising platform for larger brands. And Dwolla typically describes its Twitter payment efforts as a social experiment.

"The idea isn't to bet the farm on these applications of the network," said Jordan Lampe, director of communications at Dwolla. "Our experiments are assuredly rare, but to be able to see the general public engage, discuss and play with the digital manifestation of an idea—one that couldn't exist, physically or digitally, without Dwolla—is pretty inspiring."

Facebook has also set rules on how its users can accept payments. Facebook once required developers to use its own virtual currency, Facebook Credits, but eventually phased out the concept.

But cryptocurrency such as Bitcoin could be a better solution for enabling social media payments, since these currencies do not rely on the legacy infrastructure to enable payments. The Bitcoin protocol enables payments by instead relying on people called miners, who authenticate the transactions, which are then recorded to a public ledger.

ChangeCoin's approach uses Twitter handles as stand-ins for Bitcoin wallet addresses.

"Consumers don't want to [be redirected] to enter credit card information," Sullivan said. "Our experience is in-flow," meaning funds can be moved without leaving the social media site.

Several other cryptocurrency companies are using social media in a similar manner.

In December, TipperCoin launched a Twitter bot that enables users to send Bitcoin. Another company, QuickCoin, is using Facebook's programming tools to allow people to comment on a post to send Bitcoin.

Dogecoin, the cryptocurrency based on an Internet meme, attributes its popularity to its ease of use on social media sites through tip bots.

"The Doge-community has done wonders for mass consumer adoption of cryptocurrency," said Sullivan. They're "building a community and getting people excited…and aligning a bigger initiative behind cryptocurrency," he said. One example is Doge 4 Water, a fundraising effort to help people in Kenya gain access to clean water.

ChangeTip's approach also supports keywords as substitutes for dollar amounts. A beer equates to sending $3.50, a hamburger is $2.50 and a cookie or a coffee is $1.50.

We wanted "to separate the tangible dollar value from the token of appreciation," said Sullivan. "It means something when I say 'I want to buy you a cup of coffee' and disconnects that from the fact that it's only $1.50. It's a way to send a small tip without cheapening the experience."

ChangeTip does not have a transaction fee. It uses an internal ledger to track the tips being sent and received, thus speeding up transactions at virtually no cost to the company.

Starting January 15, it will charge a small fee for withdrawing funds. The company works with Coinbase to provide cash-out services in the U.S. and is currently in talks with other exchanges around the world.

ChangeCoin is currently focused more on generating adoption than revenue. This attitude was echoed by BitPay, a Bitcoin merchant services provider, which dropped its fees for small businesses to attract more users.